Medicaid Transformation Press Release – Still Relevant

“Market-Based Medicaid” Bill Would Give Missouri Most-Market Based Medicaid System in the Country by Injecting Price Competition in Medicaid for the First Time in History

February 26, 2013

Representative Jay Barnes (R-Jefferson City) filed legislation Tuesday to transform Missouri’s Medicaid system into the most market-oriented public health care system in the entire country. The bill would protect Missouri taxpayers by saving at least $741 million and potentially billions over the first eight years of implementation. It would also reduce dependence by lowering the total number of Missourians eligible for Medicaid.

Barnes’ Market-Based Medicaid proposal would inject personal responsibility and price competition into a system sorely lacking in effective constraints on runaway spending. Under current law, much of the state’s Medicaid system operates under a fee-for-service model in which there is no incentive for anyone to reduce costs. Market-Based Medicaid would replace the “no-brakes” fee-for-service model with a managed care model designed to encourage the efficient use of taxpayer resources. In addition, it would empower recipients to choose their own health insurance plan, and, for the first time in Missouri history, require bidders providing managed care plans to compete on the basis of price.

Creating the Most Market-Based System in History through Real Price Competition

Market-Based Medicaid would introduce price competition into Missouri for the first time. Managed care bidders would be forced to compete on the basis of price, with the lowest cost conforming bid being guaranteed acceptance into the market. Just as important, at the time of sign-up, recipients will be incentivized to choose more affordable plans by rewarding them for choosing lower-cost plans. For the first time in the nearly five decade history of the federal Medicaid program, recipients would be given the financial incentives to choose the plan most affordable for taxpayers.

“Missourians understand that competition is the most powerful force the world has ever known to reduce costs in any market,” Barnes explained. “Market-Based Medicaid will introduce real price competition to Medicaid for the first time in history, bringing down costs for Missouri taxpayers.”

“We will go from a system with centrally-planned prices set by government employees to one with decentralized decision-making by private market participants who know the health insurance industry better than any central planner ever could,” Barnes continued.

Market-Based Medicaid would empower recipients to choose between either a high-deductible health plan or a pre-paid co-pay plan. The state would fund the deductible or co-pay card depending on the plan chosen. No deductible or co-pay would be applied to preventive or primary care services. However, a steep deductible or co-pay would be assessed upon the use of unnecessary emergency room services. Recipients will be incentivized to use care wisely by rewarding them with a portion of the funds remaining on their deductible or co-pay card at the end of the year. The goal of such measures is to encourage recipients to scrutinize their decisions. A recipient considering whether to present at an emergency room with a sprained ankle will, for the first time in the history of Missouri’s Medicaid program, have a real disincentive to use the ER for such a non-emergency.

“We want to end the wasteful use of the ER for non-emergencies,” Barnes said. “Under the current broken system, Medicaid recipients have no reason not to waste taxpayer dollars at the ER because recipients have nothing at stake. Market-Based Medicaid will dramatically change the incentives. For the first time in the history of Missouri Medicaid, recipients would have real financial disincentives to wasting taxpayer dollars in hospital ERs around our state.”

Market-Based Medicaid would also maximize cost-sharing allowed by the federal government, requiring recipients to pay $4 or $8 for prescription drugs and $4 for specialist doctor visits.

“Participants should be required to pay real money out-of-pocket in addition to the new incentives,” Barnes added. “Market-Based Medicaid would maximize cost-sharing to require recipients to pay as much of their own money into the health care system as reasonably allowed.”

Requiring Gov. Nixon to Demand an Opt-Out of ObamaCare Medicaid

Market-Based Medicaid would require Gov. Nixon to demand an opt-out of ObamaCare Medicaid from the federal government. Other states with conservative governors like Sam Brownback of Kansas and former Gov. Jeb Bush of Florida have received waivers to move to managed care, and at least two states (Florida and New York) have received waivers for innovative incentive systems which reward recipients for making healthy choices. But no state has ever received a waiver for moving to managed care while injecting true price competition into Medicaid through incentives to pick the most affordable managed care plans available. Though it has never been done before, there is no direct prohibition in federal law on incentive payments for choosing affordable coverage.

“Market-Based Medicaid would force President Obama to put his central-planning ideology aside in order to increase access to care for those least able to afford it,” Barnes said. “This innovative new delivery system can serve as a model for other states to save billions in Medicaid spending across the entire country.”

“This proposal is an all-or-nothing proposition,” Barnes continued. “If the waiver is not granted, the bill has no effect.”

Expanding Health Homes for Missourians with Disabilities and Chronic Conditions

Market-Based Medicaid will expand statewide the health care home model introduced to Missouri by former Gov. Matt. Blunt to coordinate care for low-income Missourians with disabilities or chronic conditions. Health care homes assign a provider to coordinate health care – leading to better outcomes for recipients and reduced costs for taxpayers.

The high-deductible plan is modeled partly after legislation enacted in Indiana under Republican Governor Mitch Daniels in which Medicaid eligibility was expanded to 200 percent of the federal poverty level. Another similar proposal was offered by Gov. Matt Blunt in 2008 which would have expanded access to health insurance for working Missourians making up to 225 percent of the federal poverty level.

At the federal level, Congressman Paul Ryan proposed legislation in 2009 which would have provided recipients up to 100 percent of the federal poverty level with a block grant of $5,000 to purchase private health insurance, an amount which could have been matched in any amount by state governments. Under the current Medicaid match-rate, a Missouri recipient would have received a subsidy of $8,064 per year. Rep. Ryan’s Patients’ Choice Act would have also provided similar subsidies for families making up to 200 percent of the federal poverty level – twice the level proposed with Market-Based Medicaid.

“Conservatives have tried for decades to introduce true market-based reforms into entitlement programs,” Barnes explained. “This Market-Based Medicaid proposal would put these ideas into action for the first time in public health care. Missouri would serve as a model for market-based Medicaid reform for the entire nation.”

Streamlined Eligibility

Market-Based Medicaid would also streamline Medicaid eligibility standards. Medicaid categories with eligibility below 100 percent would be increased and those above would be decreased. By setting more consistent standards, Market-Based Medicaid would reduce dependency for Missourians above the poverty level. These reductions in eligibility would be contingent upon the existence of a functioning health care exchange under which robust subsidies would be available. For example, a single mother making $20,123 per year would only be required to pay two percent of her income, or approximately $34 per month, for health insurance.

“Missourians living above the poverty level should be required to take more personal responsibility for their health care decisions,” said Barnes. “Requiring Missourians in these income brackets to choose their own private health insurance plans with low affordable premium payments will improve the quality of the health care they receive and dramatically reduce costs for Missouri taxpayers so that we can get help to those least able to afford access to care.”

The increase to just 100 percent of the federal poverty level would require a waiver from the federal government. In December, Health and Human Services Director Kathleen Sebelius told 11 Republican governors who requested an enhanced federal match rate at only 100 percent that it would not be available.

Barnes stated Sebelius’ response was a political and not a legal decision. “If the Obama administration is serious about increasing access to care for those least able to afford it, it’s going to have to put down its ideological shield and abandon the one-size-fits-all liberal approach that it has taken so far,” Barnes said.

Saving Missouri Taxpayers Billions of Dollars

The free market reforms and reductions in eligibility more than pay for Barnes’ Market-Based Medicaid proposal. Over the first eight years of the reforms, it would save taxpayers at least $741 million and likely billions of dollars. In 2021, the first year the state would be responsible for 10 percent of the costs of increased eligibility, the reforms would save Missouri taxpayers at least $83.5 million. In addition, the bill contains a contingent sunset so that if the federal government ever breaks its promise, the increased eligibility is automatically eliminated.

“Missouri taxpayers cannot afford a straight Medicaid expansion,” Barnes said. “But by transforming the system and streamlining eligibility, we create a fiscal note so positive that Missouri taxpayers can’t afford not to transform this broken system.”